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F(d)igital – Disrupting finance in a digitally enabled world

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Finance functions are rethinking their operations by building on the opportunities offered by digital technologies. As finance can be considered a function of digital—F(d)igital—we predict that the way we evaluate the speed, efficiency and accuracy of core finance operations will change.

This paper explores how digital technologies are shaping the financial close and reporting process, and the three catalysts that are helping finance transformation initiatives realize their potential.

The development of digital technologies has disrupted organizations across industries by re-architecting their fundamental business operations. It has catapulted start-ups to unanticipated fame, and challenged large organizations to reinvent themselves. Finance organizations will follow this trend, especially as most CFOs view digital technologies as having a significant or even disruptive impact on their functions.

As improvements in core finance and accounting processes will be driven through digital technologies and limited human intervention, we see finance as a function of digital—F(d)igital—and predict the following changes:

An increase of around 200% in transaction-processing automation

The cost of finance reduced by half

At least 70% of finance activities delivered through integrated, hybrid centers of excellence

A 200% increase in productivity among finance professionals as finance becomes more integrated with business strategy goals

A tectonic shift in user experience: through the use of embedded analytics and pattern studies of connected devices, people will experience ease, convenience, and even delight when using finance services

Where does digital help reimagine finance?

The finance function in leading organizations has evolved from book-keeping and statutory compliance to a strategic partnership. An effective finance operation is measured as an equation of speed, efficiency, and accuracy. Finance will be remodeled through digital technologies that pump insights rather than raw data into the business, and that learn over time what insight is most effective (see Figure 1). For this to happen, the key elements of core finance operations – speed, efficiency, and accuracy – will also change.

Speed: Not faster but just-in-time

Efficiency: Not just automated but well-designed and organized processes

Accuracy: Not highly accurate but effectively reliable

The shift in core finance accounting and reporting processes will be driven by digital technologies that are already available in the market (see Figure 2).

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Cloud computing, mobility, and visualization tools, for example, are already delivering operational efficiencies, agility, and effective controllership through ERPs and point solutions like Blackline and Workday. The focus is now on more advanced nascent technologies like robotic process automation and machine learning.

While CFOs are aware of these technologies, they haven’t completely embraced them yet. The digital technology market is in flux, with tech start-ups growing exponentially around the world. In the meantime, these technologies will continue to collide and create meaningful solutions. For example, robotics embedded with cognitive intelligence or big data analytics leveraging NLP can deliver higher efficiencies and better insights.

As the market matures, early adopters will generate significant ROI, become industry leaders, and disrupt or eliminate traditional organizations.

While digital will be the core driver of the digital finance transformation, there are three catalysts that will help realize its full potential: advanced analytics, hybrid centers of excellence, and process alignment.

Advanced analytics – accelerating the journey to strategic business enablementMany of the digital innovations in analytics aim to tap into new, varied, and large pools of data sources, such as social media, and the internet of things, which enable data-driven organizational structures. As a result, finance professionals feel they have more data than they can work with. Data scientists are taking over these jobs by creating niche capabilities that spot trends across diverse portfolios and link them back to the business. Self-service analysis tools will reduce stakeholder dependency on finance for information.

Hybrid centers of excellence – key to dealing with disruptionCenters of excellence bundle together finance activities to create integrated operating models for managing process peaks and troughs, and remodeled finance roles. They create agile, scalable, efficient, and cost-effective organizational models to deliver core finance and accounting services across the globe. In the future, these centers of excellence will attain higher value and deliver bigger outcomes. For example, one of the world’s leading snack companies set up an internal control hub for Sarbanes–Oxley testing and access rights monitoring and remediation, which generated savings of around 40% in the cost of internal audit.

Process alignment – operationalizing the opportunity for value creationEstimates from the Genpact Research Institute, based on multiple industry sources, indicate that nearly $400 billion per year may be spent on digital efforts that do not meet ROI expectations and only delay companies’ digital transformations.

While digital technology and analytics create game-changing opportunities, and organizational models help structure the work of people involved, many companies fail to fully harness this power because they don’t focus enough energy and talent on the alignment of Data-to-Insight processes. These processes are not linear as the experience created through each cycle is re-injected into the tools and skills that will be leveraged in the next cycle. That is the foundation of an intelligent operation, which is able to sense the environmental context, act appropriately, and learn at scale.

Harnessing digital technology is more effective when using Lean management principles to align end-to-end processes. Applying design-thinking practices to reframe the challenge maximizes the probability that the new intervention will be adopted. Domain knowledge, naturally, will remain at the heart of all digital solutions. We call this a Lean DigitalSM approach.

The CFO as a digital disruptor?

The world is moving ahead at breakneck pace, and the finance function has an opportunity to lead the charge instead of lagging behind. Forward-thinking CFOs will not only embrace the digital aspects of the disruption, but also the organizational and process implications. They will also leverage their domain expertise—and that of their partners—to focus on what makes digital work.